[Federal Register Volume 62, Number 139 (Monday, July 21, 1997)]
[Notices]
[Page 39042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19032]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38837; File No. SR-CBOE-97-24]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Inc.; Order Granting Approval to Proposed Rule Change and Amendment No. 
1 Thereto Relating to a Reduction of the Quorum Requirements in 
Uncontested Elections

July 14, 1997.

I. Introduction

    On May 21, 1997, the Chicago Board Options Exchange, Inc. (``CBOE'' 
or ``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend the CBOE's Constitution 
to reduce the quorum required in uncontested elections. On June 4, 
1997, the CBOE submitted Amendment No. 1 to the proposed rule 
change.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Debora E. Barnes, Senior Attorney, CBOE, to 
Debra Flynn, Attorney, Division of Market Regulation, SEC, dated 
June 3, 1997. In Amendment No. 1, the CBOE replaced all references 
to ``Constitution'' change with ``Rule'' change, clarified the 
definition of ``uncontested elections'' by deleting the phrase ``for 
example,'' and clarified the language in Sections 3.6 and 3.7 of the 
Constitution.
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    The proposed rule change was published for comment in the Federal 
Register on June 13, 1997.\4\ No comments were received on the 
proposal. This Order approves the proposal.
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    \4\ See Securities Exchange Act Release No. 38723 (June 6, 
1997), 62 FR 32393 (June 13, 1997).
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II. Description of the Proposal

    The Exchange conducts an annual election and special meetings of 
its membership.\5\ Currently, at all meetings of Exchange members, 
including elections, a majority of the membership entitled to vote 
constitutes a quorum. The Exchange is proposing to amend Section 3.6 of 
the Constitution to reduce the quorum requirement, in uncontested 
elections only, from a majority to one-third of the members entitled to 
vote.\6\ Uncontested elections are elections in which each candidate is 
running for office unopposed. If any candidate for office is opposed, 
the entire election would be considered contested, and would require a 
majority for a quorum.
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    \5\ At annual election meetings, the CBOE membership votes for a 
slate of candidates proposed by the Nominating Committee for 
expiring terms and vacancies on the Board of Directors and certain 
other Exchange Committees, such as the Nominating and Modified 
Trading System Committees.
    \6\ In connection with the proposed amendment to the 
Constitution, the Election Committee stated that its policy under 
the reduced quorum proposal, if approved, would be to collect 
ballots and proxies in-person for three trading sessions prior to 
any meeting at which a vote would be conducted. Any change to this 
Election Committee policy would need to be approved by the Board of 
Directors and submitted to the Commission pursuant to Rule 19b-4.
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    The Exchange is also making a change to Section 3.7 of the 
Constitution to clarify that this Section governs voting by members on 
issues other than elections. The quorum requirement will remain a 
majority of the members entitled to vote on issues arising pursuant to 
Section 3.7.

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\7\ 
Specifically, the Commission believes that the proposal, as amended, is 
consistent with and furthers the objectives of Section 6(b)(5) of the 
Act \8\ in that it is designed to promote just and equitable principles 
of trade, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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    \7\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that reducing the quorum required in 
uncontested elections should improve the efficiency of the CBOE's 
election process. A quorum requirement of one-third of the members 
entitled to vote should demand less of the CBOE's resources than the 
current majority requirement which, at times, has required considerable 
Exchange staff time and resources. The Commission believes that the 
proposed rule change should maximize the use of Exchange resources.
    In addition, the Commission notes that the existing quorum 
requirement will be reduced only for uncontested elections. The 
Commission believes that Exchange members should be encouraged strongly 
to vote in contested elections and therefore, it would be inappropriate 
to reduce the quorum requirement for contested elections. The 
Commission further believes that in circumstances in which even one 
nominated candidate is opposed, the more rigid quorum requirement is 
appropriate to ensure that the Exchange's membership is compelled to 
consider carefully the candidates.
    Finally, the Commission notes that the proposed rule was 
overwhelmingly approved by the Exchange's membership at the CBOE's most 
recent Annual Election Meeting, held on December 11, 1996. The 
membership's approval of the proposal indicates that CBOE's members 
expect the proposed reduction of the quorum requirement in uncontested 
elections will not affect adversely either the operations of the 
Exchange or the membership's interests.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-CBOE-97-24), including 
Amendment No. 1, is approved.

    \9\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-19032 Filed 7-18-97; 8:45 am]
BILLING CODE 8010-01-M